Euromoney’s H118 results show that all the KPIs are moving broadly in the right direction, with revenues ahead by 3%, adjusted PBT up 6% and reduced net debt. The picture shown by the moving parts is more complex, with income streams from asset management remaining under pressure but good growth from Pricing, Data and Market Intelligence and a strong performance in Events. The completion of the GMID disposal since the period end has bolstered the balance sheet by a further net £103m, giving plenty of scope for the pursuit of further acquisitions to support growth.
Euromoney Institutional Investor |
On the money |
Half-year results |
Media |
18 May 2018 |
Share price performance
Business description
Next events
Analysts
Euromoney Institutional Investor is a research client of Edison Investment Research Limited |
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Euromoney’s H118 results show that all the KPIs are moving broadly in the right direction, with revenues ahead by 3%, adjusted PBT up 6% and reduced net debt. The picture shown by the moving parts is more complex, with income streams from asset management remaining under pressure but good growth from Pricing, Data and Market Intelligence and a strong performance in Events. The completion of the GMID disposal since the period end has bolstered the balance sheet by a further net £103m, giving plenty of scope for the pursuit of further acquisitions to support growth.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/16 |
403.1 |
102.5 |
66.6 |
23.4 |
20.1 |
1.7 |
09/17 |
428.4 |
106.5 |
76.4 |
30.6 |
17.5 |
2.3 |
09/18e |
405.0 |
103.5 |
72.8 |
30.6 |
18.4 |
2.3 |
09/19e |
410.0 |
105.0 |
74.6 |
31.5 |
17.9 |
2.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Net positives
Management’s internal view was that the weakness in Asset Management related to the impact of MiFID II. It is now regarded as a longer-term structural problem around overall industry costs and the value obtained from spending on research. This is prompting a different strategy at BCA, to protect profits and invest in sales and marketing. Institutional Investor, which also sells into the asset management sector, draws more from marketing budgets and is running ahead of the prior year. Pricing, Data and Market Intelligence has been growing well, with subscriptions and events both delivering revenues up 9%, with a stronger profit performance (+13%) with the first benefits from last year’s investment. Events had a particularly strong Q2, with more banking-oriented events in the US and China, and a good turnaround at Mining Indaba. Our forecasts are adjusted for the disposal impact, which is dilutive to EPS (-4% FY18e, -7% FY19e) until the proceeds are redeployed.
Back in net cash on the balance sheet
As at the end of March, net debt was £37m (from £155m at the year-end), with rolling 12-month underlying cash conversion of 108% and net M&A proceeds of £95m. This mostly reflects the disposal of the Dealogic minority stake, along with some smaller deals, offset by the purchase of the 15% outstanding minority in Ned Davis Research. The GMID deal (flagged at the year-end) has released another $145m (£103m), leaving the group with a meaningful cash resource. The term loans put in place at the time of the share buyback/DMGT sell-down have been rolled into the existing, lower-cost RCF, giving an undrawn facility of £240m.
Valuation: Discounting opportunities
The group continues to trade at a discount to peers (we estimate this at around 5% based on a mixture of multiples), reflecting concerns over the outlook for the asset management sector. However, the group has strong cash flow characteristics and capacity for earnings-enhancing M&A, with a reverse DCF showing that the current valuation implies just 2% medium-term revenue growth on stable EBITDA margins.
Exhibit 1: Financial summary
£m |
2016 |
2017 |
2018e |
2019e |
||
30-September |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
403.1 |
428.4 |
405.0 |
410.0 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Profit |
403.1 |
428.4 |
405.0 |
410.0 |
||
EBITDA |
|
|
104.3 |
110.3 |
109.4 |
110.3 |
Operating Profit (before amort. and except.) |
101.5 |
107.1 |
107.1 |
108.0 |
||
Intangible Amortisation |
(16.8) |
(20.8) |
(24.0) |
(24.0) |
||
Exceptionals |
(37.3) |
(31.3) |
(0.1) |
0.0 |
||
Capital Appreciation Plan |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit before ass's & fin. except'ls |
47.4 |
55.1 |
83.1 |
84.0 |
||
Associates |
2.2 |
3.3 |
(0.1) |
0.0 |
||
Net Interest |
(1.1) |
(4.0) |
(3.6) |
(3.0) |
||
Exceptional financials |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
102.5 |
106.5 |
103.5 |
105.0 |
Profit Before Tax (FRS 3) |
|
|
48.4 |
54.4 |
79.5 |
81.0 |
Tax |
(18.1) |
(19.8) |
(21.3) |
(24.4) |
||
Profit After Tax (norm) |
84.5 |
86.6 |
80.7 |
80.6 |
||
Profit After Tax (FRS 3) |
30.4 |
34.6 |
58.2 |
56.7 |
||
Average Number of Shares Outstanding (m) |
126.5 |
112.5 |
107.3 |
107.3 |
||
EPS - normalised (p) |
|
|
66.6 |
76.4 |
72.8 |
74.6 |
EPS - (IFRS) (p) |
|
|
23.8 |
30.3 |
53.8 |
52.4 |
Dividend per share (p) |
23.4 |
30.6 |
30.6 |
31.5 |
||
EBITDA Margin (%) |
25.9 |
25.8 |
27.0 |
26.9 |
||
Operating Margin (before GW and except.) (%) |
25.2 |
25.0 |
26.5 |
26.3 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
601.9 |
648.8 |
391.6 |
366.5 |
Intangible Assets |
551.1 |
594.0 |
370.7 |
345.9 |
||
Tangible Assets |
14.9 |
24.4 |
16.9 |
16.5 |
||
Investments |
35.9 |
30.4 |
4.1 |
4.1 |
||
Current Assets |
|
|
170.3 |
127.8 |
333.3 |
335.5 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
78.6 |
64.5 |
68.7 |
70.8 |
||
Cash |
84.2 |
4.4 |
206.2 |
206.2 |
||
Other |
7.5 |
58.9 |
58.5 |
58.5 |
||
Current Liabilities |
|
|
(249.4) |
(267.5) |
(239.2) |
(248.0) |
Creditors |
(249.0) |
(267.5) |
(239.2) |
(248.0) |
||
Short term borrowings |
(0.4) |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(45.3) |
(212.3) |
(167.4) |
(121.8) |
Long term borrowings |
0.0 |
(168.9) |
(110.5) |
(65.0) |
||
Other long term liabilities |
(45.3) |
(43.4) |
(56.8) |
(56.8) |
||
Net Assets |
|
|
477.5 |
296.8 |
318.4 |
332.2 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
103.8 |
118.2 |
104.2 |
108.4 |
Net Interest |
(0.4) |
(1.5) |
(3.7) |
(0.4) |
||
Tax |
(16.7) |
(21.8) |
(18.6) |
(19.0) |
||
Capex |
(3.2) |
(10.9) |
(5.5) |
(5.5) |
||
Acquisitions/disposals |
(3.8) |
(99.9) |
207.3 |
(3.0) |
||
Equity Financing / Other |
10.6 |
(193.0) |
0.0 |
0.0 |
||
Dividends |
(29.9) |
(31.3) |
(33.4) |
(34.3) |
||
Net Cash Flow |
60.3 |
(240.2) |
250.2 |
46.1 |
||
Opening net debt/(cash) |
|
|
(17.7) |
(83.8) |
154.6 |
(95.6) |
Redemption of pref |
7.8 |
0.0 |
0.0 |
0.0 |
||
Other |
(2.0) |
1.8 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(83.8) |
154.6 |
(95.6) |
(141.7) |
Source: Company accounts, Edison Investment Research
|
|
Research: Metals & Mining
Wheaton Precious Metals’ (WPM) silver streams outperformed our expectations in Q118, while its gold streams performed closely in line. However, after demonstrating the traditional ‘flush through’ effect in Q417, sales of silver and gold in Q118 reverted to close to their long-term trends, with an (albeit temporary) 14.6% under-sale of silver and a 12.2% under-sale of gold relative to production. Nevertheless, adjusted net earnings of US$69.9m and EPS of 16 cents were within 10% of our previous expectations of US$77.0m and our forecasts for FY18 remain, to all intents and purposes, unchanged (see page 7).